Until recently the Latin American nation showed off its economic performance as exemplary for the rest of the region.

But in 2010 the government debt increased both in gross and net terms. Although the debt increased at a slower rate last year than in 2009, overall the increase amounted to 5.9 percent or $1.3 billion.

Official Central Bank figures showed the total government debt of $23.185 billion equaled 57.6 percent of Uruguay's gross domestic product.

The Uruguayan economy has been growing steadily since 2003 and continued that momentum of growth through the 2009 downturn. In 2010, the economy expanded 8.5 percent and is expected to grow 6 percent in 2011, although inflation has become a major threat and government debt has added a new dimension.

Officials said the continuing weakness of the U.S. dollar was hindering Uruguay's efforts at keeping track of government accounts. Government-managed Uruguayan banks have tried to counter the depreciation with strong purchases of dollars.

Several domestic factors have worsened the situation. Debt growth in 2009 coincided with the global economic downturn as well as Uruguay's elections. Central Bank figures showed that debt growth in that year alone amounted to 32.4 percent and reached $21.89 billion -- about 69.5 percent of GDP.

The country's indebtedness was also attributed in part to a fall in the government's non-financial revenues plus an increase in public debt service and higher primary disbursements from the central government and social security.

Public sector non-financial revenue, about 28.8 percent of GDP, showed 0.3 percent drop compared to the previous month. A major factor was lower primary revenue from government-owned companies which dropped from 1.9 percent of the GDP to 1.7 percent of the GDP in February because of increases in the cost of electricity generation.

The government is also having to take into account projected higher expenditure on infrastructural developments and outlays in the education sector.

Uruguay's Economy and Finance Minister Fernando Lorenzo warned the nation not to slide back into complacency as major challenges needed to be faced head-on.

Addressing the Inter-American Development Bank annual assembly in Calgary, Canada, Lorenzo said, "At this time the worst of dangers is self-complacency."

Putting Uruguay's position in a wider regional context, Lorenzo said: "It's very much true that economic indicators reflect the positive moment the region is going through. Nevertheless, at first sight, some of those indicators could be hiding significant vulnerabilities in some economies, vulnerabilities that if not addressed could in the future anticipate new crisis."

Turning to Uruguay's prospects, the minister said that in spite of the efforts and economic achievements, "we haven't bought the future, although we are optimistic about it."

The consolidation of the growth process and the increase of development potential growth in Uruguay and the region depend, "according to our modest opinion on certain crucial factors," said Lorenzo.

Those factors included steadier productivity, more private and public savings and decisive steps toward greater integration among countries of the region and of the Latin American region with the rest of the world, he said.

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